In a recent opinion, the Colorado Supreme Court set a new standard for preserving evidence even before litigation begins.
For decades, Colorado courts have recognized that parties engaged in litigation have a duty to preserve evidence once litigation has commenced. Failure to preserve such evidence or willful destruction or concealment of such evidence is referred to as “spoilation” and can result in case-defining sanctions against the offending party during litigation. In general, a duty to preserve evidence is triggered when litigation arises through the filing of a complaint or, at least, once a party receives notice of an intent to litigate through a discovery request or a letter demanding preservation of evidence.
But when does a party’s duty to preserve evidence trigger before litigation arises or before a party is given actual notice of likely litigation? The Colorado Supreme Court weighed in to answer this question in Terra Management Group, LLC v. Keaten, 2025 CO 40. In doing so, the court considered when the duty to preserve evidence may arise before any notice of potential litigation and created a new standard requiring potential parties to preserve evidence relevant to reasonably foreseeable litigation.
Terra Management Group, LLC v. Keaten
The Colorado Supreme Court granted certiorari in Keaten to resolve the issue of whether the common law requires a clear showing that a prelitigation party knew litigation would be filed or learned litigation was likely to trigger a precomplaint duty to preserve evidence, or only requires that a prelitigation party should have known of the other party’s potential damage and its potential liability. 2025 CO 40, ¶ 5 n.1. Put differently, the court was asked to determine what (and when) pre-litigation duties exist for potential defendants to preserve evidence before receiving notice or any indication that litigation may be filed against them.
In creating a new standard for pre-litigation preservation, the court ruled that “a party has a duty to preserve evidence relevant to litigation that they know or should know is pending or reasonably foreseeable.” Id. Thus, a court may sanction a party for destruction of evidence if the party knew or should have known that “(1) litigation was pending or reasonably foreseeable and (2) the destroyed evidence was relevant to that litigation. Accordingly, a duty to preserve relevant evidence arises when a party knows or should know that litigation is pending or is reasonably foreseeable.” Id. ¶ 35.
Whether litigation is “reasonably foreseeable” is “both fact-specific and sufficiently flexible to afford a trial court the discretion to address the wide range of factual situations that arise in the spoliation context.” Id. ¶ 37. The court’s opinion guides trial courts to consider the totality of the circumstances to determine whether litigation was reasonably foreseeable for the purpose of imposing potential sanctions, including “the behavior of the party allegedly prejudiced by the spoliation,” a “plaintiff’s delay in reporting a concern or in filing suit,” and “whether a plaintiff or someone on their behalf made affirmative statements suggesting an issue had been resolved or that no litigation is anticipated.” Id. ¶ 39.
A defendant’s conduct can also be relevant to determining whether litigation was reasonably foreseeable, “including actions such as consulting with counsel or notifying an insurer.” Id. Further, “the nature and extent of the injuries at issue may also inform this analysis.” Id. While the new standard is broad and flexible, the court did pronounce that the “mere existence of a potential claim or the distant possibility of litigation does not trigger a pre-litigation duty to preserve evidence.” Id. ¶ 38 (emphasis added).
Implications
So, what does Keaten mean for Colorado business owners and potential litigants? The flexible standard announced in Keaten comes at the expense of bright-line rules that help guide conduct and set internal preservation policies. Now, business owners can be subject to harsh sanctions for failing to preserve evidence even before litigation is filed or a demand letter is received. That means business owners must be sure to monitor informal complaints, communications and other indications that a party may initiate litigation to comply with Keaten’s “reasonably foreseeable” standard.
As the United States Chamber of Commerce wrote in an amicus brief, “Preserving material comes at a substantial cost. Maintaining documents and storing physical items costs both money and the attention of personnel. To reduce wasteful expenses, all businesses routinely discard materials that no longer have value for their ongoing operations and make improvements to property to enhance value.” Amicus Curiae Brief for the Chamber of Commerce of the United States of America, in Support of Petitioners, Terra Mgmt, Grp., LLC v. Keaten, 2025 CO 40, 2.
Under the new standard, current preservation practices invoked in the normal course may not accommodate all circumstances that could trigger preservation obligations. Business owners may not be able to rely on document retention policies or other ordinary-course practices as a safe harbor. While additional preservation safeguards will no doubt add costs and expense to business owners, the costs of case-defining spoliation sanctions could be severe. Accordingly, business owners need to be conscious about when litigation may become “reasonably foreseeable” and prepared to consider whether ordinary practices will be sufficient to meet preservation obligations in the circumstances.
Summer Associate Teddy Adams contributed to this client alert.
